The rate of expansion in eurozone manufacturing production eased to its lowest during the current 14-month growth sequence in August, as companies faced slower increases in both total new orders and new export business. The final seasonally adjusted Markit Eurozone Manufacturing PMI® posted 50.7 in August, down from 51.8 in July, its lowest reading since July last year. The headline PMI was also below its earlier flash estimate of 50.8.
National PMI data signalled a broad easing in the manufacturing recoveries underway across much of the currency union. Although Ireland was a noticeable exception, with its PMI at the highest level since the end of 1999, rates of expansion slowed in Spain, the Netherlands and Germany.
(…) France remained the laggard, with its PMI signalling the sharpest rate of decline since May 2013, while Italy dropped back into contraction territory following 13 months of expansion.
The rate of expansion in new work received also slowed to the weakest in the current 14-month period of growth. Economic and geopolitical uncertainties were the main factors underlying slower demand growth. Inflows of new export business posted the slowest rise since July 2013.
France was the only nation to report an outright decline in new export orders in August, while rates of increase eased in Germany, Italy and Greece. Ireland, Spain and Austria reported stronger inflows of new export business.
With the trend in new order inflows still generally lacklustre overall, backlogs of work fell further and companies trimmed their payrolls for the second straight month. Although the reduction in headcounts was only slight, it was nonetheless the steepest since November 2013.
The big-three nations of Germany, France and Italy all reported job losses, as did Greece. Staffing rose in Spain, the Netherlands, Austria and Ireland, but Ireland was the only nation to report a faster pace of hiring than in July.
Signs that the manufacturing sector may be on course for further easing in the coming months was signalled by data on purchasing and stock holdings. Input buying volumes fell for the first time in over a year and inventories were reduced further as strong competition led companies to maintain a cost-cautious position. Meanwhile, the forward-looking ratio of new orders to finished goods inventories dipped to a 13-month low.
Average input prices continued to increase during August, with the rate of inflation slightly lower than the previous month. Manufacturing output charges continued to show little movement, with the rate of inflation little-changed compared to the pace prevailing over the prior three months.
German and Italian manufacturers continued to signal a modest degree of pricing power, in contrast to the cuts in selling prices seen across the other nations covered by the survey.